First things First

More and more in this competitive market Realtors will not even begin to show you homes until you are pre-approved with a lender.  It may seem kinda mean and like they are just in it for the money, but truly this is protecting you as the buyer.  It happens all the time, A buyer falls in love with a house they saw on line!  It was love at first sight!  You are dying to get inside that house, you call your realtor you worked with when you purchased your last house and now she asks if you are pre approved?  You say ummmm……what the heck does that mean ?

Unless you are paying for your home in cash, there are some essentials you will need to put together to get that pre-approval that will make your home buying experience so much more enjoyable and avoid the emotional rollercoaster that takes place when you get your heart set on a home you possibly can’t afford, or even worse, you can afford it, but someone else had a stronger offer because they they were already pre-approved.

I recommend keeping all of the following in a nice folder you will not misplace.  You will be asked for the same information a number of times and often be asked for new information to add to it.

1. ADDRESSES

Be prepared to give your addresses for and dates of residence for at least the last two years.

2. PROOF OF INCOME

You will be asked to provide the last two years of W-2 statements and tax returns.  The lender you have chosen will also want your most recent pay stubs.

3. DEBT -TO- INCOME RATIO

Your debt to income ratio (DTI) they are going to use that acronym a lot, and others so hold on, and ask when you don’t know.  Your DTI should be 40% including mortgage and insurance.  How in the world do you figure that out you ask ?? Simply put…Add up all your monthly income, then subtract all your debts.  So, if your monthly income is $10,000, you want no more than $4,000 in debt payments each month.

4. EMPLOYMENT VERIFICATION

Your employment status will be checked.  It is best to have 2+ years at the same job, or the same field of work.

5. PROOF OF ASSETS

Current bank statements will help your lender determine you will be able to make a good downpayment.  Keep bank statements, investment statements and any other funds you can use for your down payment.

6. GOOD CREDIT

Good credit helps a lot with the pre-approval process.  However, don’t be intimidated if your credit is less than perfect, there are a lot of programs out there to help people.  Be prepared to give your lender your social security number so they can pull your credit reports.

7. YAY!  YOU ARE PRE-APPROVED

You will receive a letter from you lender stating you are pre-approved that states the price of the home you should be looking for.  Remember, that amount is up to you and what you feel comfortable with.

Being pre-approved prior to shopping for your new home can make the home buying process a lot of fun!  Information os power!  You and your Realtor know what you can afford.  You can avoid a lot of heart ache and pitfalls just by taking a few simple steps prior to starting the search for your dream home.